What's the dumbest deal you've seen?

Gaurav Sodhi recounts a silly recent deal made by Roc Oil and invites you to recall the dumbest deal you've seen.

Impressive deals can reflect shrewd management, which is why it is worth analysing the details to see who has gained the most value. But if I’m honest, every now and then I also get a chuckle out of a lousy business decision (as long as I don't own shares in the company).

Three months ago, junior oil explorer Roc Oil announced the sale of its 20% interest in an exploration permit off the coast of Western Australia known as WA-351-P. Operated by resources titan BHP Billiton and located within a much larger prospective area that boasts more than a dozen recent oil discoveries by US energy firm Hess Corporation, WA-351-P has long been considered a jewel in the increasingly rusty crown of Roc. The sale was therefore somewhat surprising.

Even more surprising was the price and buyer. Roc's permit-partner Tap Oil had first right of refusal. Not previously known for its deal making nous, Tap picked up the stake for just $15m, increasing its stake from 25% to 45%.

This week Tap sold 25% of WA-351-P to a Japanese alliance for the effective sum of $40m, more than double the price it paid Roc just three months earlier; a handy return that makes Roc look rather foolish.

The amounts of money involved aren’t huge and, by itself, of no great significance. But it does suggest Roc has sunk from its former glory days and appears to be desperate for cash, while Tap is dancing to a new beat. And it ain’t funk.

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